Exelon Corp (EXC) — Q1 2019 Earnings Call Transcript

Thank you, Lindsey. Good morning, everyone, and thank you for joining our first quarter 2019 earnings conference call. Leading the call today are Chris Crane, Exelon's President and Chief Executive Officer, and Joe Nigro, Exelon's Chief Financial Officer. They're joined by other members of Exelon's Senior Management team who will be available to answer your questions following our prepared remarks. We issued our earnings release this morning along with the presentation, both of which can be found in the Investor Relations section of Exelon's website. The earnings release and other matters, which we discuss during today's call, contain forward-looking statements and estimates that are subject to various risks and uncertainties. Actual results could differ from our forward-looking statements based on factors and assumptions discussed in today's material and comments made during this call. Please refer to today's 8-K and Exelon's other SEC filings for discussions of risk factors and factors that may cause results to differ from management's projections, forecasts, and expectations. Today's presentation also includes references to adjusted operating earnings and other non-GAAP measures. Please refer to the information contained in the appendix of our presentation and our earnings release for reconciliations between the non-GAAP measures and the nearest equivalent GAAP measures. I'll now turn the call over to Chris Crane, Exelon's CEO.

Thanks, Dan, and good morning, everyone, and thank you for joining us today. During the quarter, we achieved success on several key fronts and reached a couple of milestones. First, the U.S. Supreme Court declined to hear the ZEC cases, clearing the last legal challenge at the federal level for the Illinois and New York programs. The decision affirms that states have the right to protect their citizens by favoring clean energy, and it is a win for the consumers, policymakers, and the regulators. Second, we received credit upgrades from both S&P and Fitch. These upgrades recognize successful execution of our utility-driven growth strategy and reduction in business risk while maintaining strong financial metrics. Third, we reached settlements in New Jersey on the ACE rate case and the infrastructure investment program. These outcomes reflect the continued positive evolution of our partnership with regulators built on improvement and reliability and customer satisfaction. Finally, turning to slide 5, in March, we celebrated the seventh anniversary of the Constellation merger and the third anniversary of the PHI merger. Each merger has positively contributed to our strategy of increasing our regulated business mix and providing more stable earnings. Before these mergers, Exelon earned a mix of 28% utilities and 72% generation. In 2021, we project that mix will have flipped, with nearly 70% earnings coming from the utilities. Through the Constellation merger, we grew our regulated earnings with the addition of BGE, and also benefit from the combination of Exelon and Constellation's competitive business, creating an industry leader integrated business that supports sufficiently hedging of plans while capturing incremental margins and cash flows. The PHI merger further advanced our strategy to become more regulated while creating value for customers and communities we serve. We are meeting or exceeding all of our reliability merger commitments across the PHI service territory and experiencing record reliability. The frequency and duration of outages have improved at each utility. Customers are out of power less frequently and are restored to service much faster when out of power. In 2018, Delmarva customers had the lowest frequency of outages. At Pepco, customers saw the fastest restoration time. And customer satisfaction is at an all-time high at ACE, Delmarva, and Pepco. We're also delivering on our promise to be a true partner with the communities we serve. The PHI utilities have contributed more than $470 million in total economic impact since the merger closed. In 2018 alone, these utilities spent $313 million with minority- and women-owned suppliers, which is between 22% and 29% of each utility's total procurement spend. Each utility has made investments in workforce development programs, including partnering with the District of Columbia to create the DC Infrastructure Academy. We are also an important community partner for hundreds of organizations in the PHI service territory, contributing more than $15 million in financial support and volunteering approximately 85,000 hours since the merger was approved. Because of the improved service and enhanced partnership with our communities, we are building trust in our jurisdictions and are seeing a more positive regulatory environment develop. Since the merger, we have reached constructive settlements in each of the PHI jurisdictions, including Pepco, Maryland, and DC, and we've had our first settlements since the 1980s. Exelon has delivered on the promises we made to our customers, communities, and shareholders when we merged with PHI in 2016. Turning to our financial results, on slide 6, we had a strong quarter. On a GAAP basis, we earned $0.93 per share versus $0.60 per share last year. On a non-GAAP operating basis, we earned $0.87 per share versus $0.96 per share last year. Joe will cover the drivers in his remarks. Turning to slide 7, at the utilities, we continue to execute the top quartile levels across key customer satisfaction and operating metrics. The investments we are making are resulting in improved reliability, which is strengthening our relationship with our customers and the regulators. We remain focused on helping our customers and communities become more energy efficient, saving energy and money. We have been doing this for years, and I'm happy to say once again the EPA named all five of our eligible companies, BGE, ComEd, Delmarva, PECO, and Pepco as 2018 ENERGY STAR partners of the year. Generation performed well during the quarter. Nuclear produced 39.2 terawatt-hours of zero-emission electricity with a capacity factor of 97.1%, the best quarter performance in more than 10 years. During the polar vortex, where the temperatures were significantly below zero, our fleet ran at full power keeping families in our markets safe and warm. Exelon power and gas and hydro dispatch matched 97.8% and wind and solar capture 96.5%, exceeding plan. Moving on to slide 8, since the beginning of the year, there have been a number of important developments. The U.S. Supreme Court upheld the clean energy programs. Illinois is looking to advance its clean energy goals. Pennsylvania is considering adding nuclear to its alternative energy standard. New Jersey awarded zero-emission credits. PJM has made a scarcity filing in March with the request for approval date by mid-December, and first act on fast-start energy pricing reforms. These actions recognize the importance of preserving existing resources of carbon-free energy and addressing the underlying deficiencies in the market. In Illinois, legislation was introduced that would require the Illinois Power Authority to procure clean capacity for ComEd customers using that fixed resource requirement mechanism that is currently in the PJM tariff. In addition to supporting a course for a truly clean energy future in Illinois, the legislation will also ensure that consumers pay less than they do today. The concept of the FRR has wide support and has been endorsed by the Illinois CUB, the Clean Jobs Coalition, and organized labor. Another piece of legislation has been introduced in Illinois to extend the formula rate. ComEd's formula rate provides tangible benefits to consumers, as well as the certainty we need to make investments and improve reliability and resiliency in customer service while keeping bills affordable. In the nine years that ComEd has filed the formula rate, we have asked for rate decreases four times. It's a busy legislative season as Governor Pritzker and the General Assembly tackle Illinois' significant budget problems. However, we are optimistic these two priorities can get done this year. In Pennsylvania, a bipartisan group in the House and Senate introduced legislation that would treat nuclear equally to other non-emitting resources by adding it to the ultimate energy portfolio standard. Several hearings have been held in the House and Senate on the bill, but it's not clear if action will be taken in time to reverse our decision to retire TMI. We also achieved two important milestones for our existing ZEC programs in April. First, as mentioned, the U.S. Supreme Court declined to hear the challenges to the New York and Illinois ZEC programs, consistent with the resounding decision we received from the district and circuit courts. Second, the New Jersey BPU awarded ZECs to all three units in New Jersey, allowing them to continue to provide zero-carbon energy to the state. We are pleased to see the states moving forward with thoughtful energy policy that preserves the rights to chart a clean energy future. Finally, turning to FERC and PJM, we are pleased FERC is acting on the fast-start reforms that expand the price setting eligibility for block loaded resources. FERC has requested that PJM submit a compliance filing by July 31st, and we expect the reforms to be implemented shortly after that. In addition, PJM filed a 206 petition to improve the pricing of reserves, which we have previously referred to as scarcity or ORDC reforms. These reforms, along with base load price formation, are essential to preserve an effective competitive market in PJM, and we're happy to see the programs being adapted to address these clear needs. Turning to slide 9, much of the policy work we've engaged in, including preserving zero-carbon generation, we have viewed as necessary to bridge a comprehensive carbon policy. In the past, it has been essential for the government, but for every business, particularly energy businesses, along with their customers and stakeholders to take action on reducing carbon emissions. For several decades, Exelon has been positioning itself for a carbon-constrained world and acting as a leader advocating for carbon policy at the state and federal level. We have built the cleanest power generation company in the country, we have divested or retired all of our coal generation and invested in renewables and increasing our output of our nuclear fuel. As a result, Exelon has produced more clean energy than any other company in the United States by a factor of two, with every nine clean megawatts in the U.S. coming from an Exelon plant. We've avoided 67.8 million metric tons of greenhouse gas emissions, the equivalent of taking 14.5 million cars off the road, through two previous carbon reduction goals, and we are on track to meet the most recent goal of an additional 15% reduction of emissions from internal operations. We're a leading voice in supporting policies and regulations that require reduced emissions and encourage technology changes, and across our businesses, we are working to enable clean energy solutions for our customers and communities. In 2018 alone, our energy efficiency program saved customers 21.9 million megawatt-hours of electricity avoiding 9.9 million metric tons of greenhouse gas emissions. We're investing in electric transportation and charging infrastructure at both utilities and Constellation. Exelon is also involved in grid-scale energy storage development to enable faster and greater reliability for the use of renewables. One example of this is through our efforts to launch the Volta Energy, which works with the national labs and research universities to commercialize new technologies. The world is changing in terms of awareness of the scope of climate change and the need for new potential solutions. Our customers, our cities and our communities, as well as our employees are demanding clean power. So that is what we intend to provide. We still have a long way to go, but the engagements we are seeing at the state level affirm our view that these policies will be part of our country's future. With that, now I'll turn it over to Joe to continue the call.

Thank you, Chris, and good morning, everyone. Today, I'll cover our first-quarter results and quarterly financial updates, including trailing 12 months ROEs at the utilities and our hedge disclosures. Starting with slide number 10, we had a strong quarter financially. We earned $0.93 per share on a GAAP basis and $0.87 per share on a non-GAAP basis, which is at the upper end of our guidance range of $0.80 to $0.90 per share. Our performance in the quarter was consistent with our expectations, including a positive $0.01 net benefit around timing of expenses. Exelon utilities delivered a combined $0.56 per share, net of holding company expenditures. Utility earnings were modestly lower than our plan due to O&M timing at ComEd and PECO, which will reverse itself over the course of the year. Exelon Generation earned $0.30 per share, outperforming the plan. This was a result of some realized gains in our nuclear decommissioning trust fund and favorable timing of O&M. We are reaffirming our full-year guidance of $3 to $3.30 per share. For the second quarter, we are providing adjusted operating earnings guidance of $0.55 per share to $0.65 per share. On slide 11, we show our quarter-over-quarter walk. The $0.87 per share in the first quarter this year was $0.09 per share lower than the first quarter of 2018. Exelon Utilities less HoldCo earnings were up $0.10 per share compared with last year. This earnings growth is driven primarily by higher rate base, new rates associated with completed rate cases, and lower storm costs at PECO and PG&E relative to the first quarter of 2018. Generation earnings were down $0.19 per share compared with last year. The biggest driver was the absence of $0.10 per share of ZEC catch-up payment from 2017 due to the timing of the final Illinois ZEC approvals. Generation was also impacted by lower realized power prices. Moving on to slide 12. As Chris mentioned, we celebrated the third anniversary of the merger with PHI in March. We have seen tremendous improvement in PHI's operational performance, customer satisfaction, and relationships with our communities and regulators, which is leading to more constructive outcomes. Given our progress on the commitment of our 9% to 10% ROEs across our utilities and the quarterly variability at the individual PHI utilities, depending on rate case timing, we are now consolidating the PHI utilities trailing 12-month ROEs. We have also changed the format of the slide to show the relative size of the aggregate PHI utilities when compared to legacy Exelon utilities and the consolidated Exelon utilities. In total, the PHI utilities represent approximately 26% of our total rate base of $41.2 billion. On a consolidated basis, the PHI utilities earned a 9.3% ROE for the trailing 12-months. This is a 90-basis point improvement over consolidated 8.4% from the fourth quarter of 2018. The improvement is due to 2018 distribution rate case settlements at both Delmarva and Pepco, favorable transmission revenue from the higher peak load in true-ups, the roll-off of higher storm costs, and favorable O&M timing at Delmarva and Pepco, which will reverse over the course of the year. At the legacy Exelon utilities, our earned ROEs are modestly better, largely driven by the roll-off of the March 2018 winter storm costs as well as new rates associated with completed rate cases at PECO and PG&E. Including PHI, the combined Exelon utilities have a 10.2% earned ROE, which is above our 9% to 10% earned ROE target and 50 basis points higher than last quarter. We remain focused on meeting our utility earnings growth target by maintaining the earned ROEs at PHI and sustaining strong performance at our other utilities. Turning to slide 13. Since the last call, the New Jersey Board of Public Utilities approved the Atlantic City Electric settlement agreement, which provides for a $70 million revenue increase. The new rates went into effect on April 1st. In addition, the BPU approved recovery of $96 million of capital over a four-year period through the infrastructure investment program to improve reliability. On April 8th, ComEd filed its annual distribution formula rate update with the Illinois Commerce Commission seeking a $6.4 million decrease to base rate, representing the fourth requested rate reduction under the formula rate design. We expect to receive an order in the fourth quarter. Pepco Maryland filed its latest rate case in January, requesting a $30 million revenue increase, which has been updated to $27.2 million with the test year updated to actuals. The request is based on the continued infrastructure investments to enhance reliability in customer service. We expect to receive an order in the third quarter of this year. More details on the rate cases can be found on slides 21 through 24 in the appendix. Turning to slide 14, during the first quarter, we invested $1.2 billion of capital across the utilities and are on track to meet our $5.3 billion commitment for 2019. These investments will improve the reliability and resiliency of the grid to the benefit of our customers. This quarter, I would like to highlight two projects. The first is the modernization of Pepco's Harrison substation in Washington D.C. This $190 million project will renovate aging infrastructure to more reliably serve important loads, including two metro stations. It also expands regional transmission capacity supporting future load growth. The other project is the second phase of BG&E's large gas line replacement program in Baltimore that will be recovered through the STRIDE capital recovery mechanism. The second phase includes $732 million of investment, and we will replace approximately 240 miles of gas lines by the end of 2023. Replacing these lines will improve the safety and reliability of the distribution system. During the first phase of the program, BG&E replaced 208 miles of gas lines. Since the program started in 2014, STRIDE has created 600 full-time jobs in the BGE service territory. On slide 15, we provide our gross margin update and current hedging strategy for the generation company. As a reminder, our disclosure previously reflected the planned retirement of TMI and included New Jersey's ZEC revenues. Since last quarter, total gross margin has flattened every year. In 2019, open gross margin decreased by $150 million, primarily due to lower prices at West Hub, New York Zone A, and NiHub. During the quarter, we executed $150 million in new power business. In 2020 and 2021 respectively, open gross margin is up $50 million relative to our prior disclosure, primarily on the back of higher power prices at NiHub and New York Zone A which was partially offset by lower ERCOT spark spread. Mark-to-market of hedges was down $50 million due to our hedge position offsetting the increasing gross margin, and we executed $50 million of new power business in both years. Our generation to load matching strategy continues to yield positive results. We ended the quarter 8% to 11% behind ratable in 2020 and 1% to 4% behind ratable in 2021 when considering cross-commodity hedges. Our open position is primarily concentrated in the Midwest and Texas. Given the strength of our balance sheet, we are comfortable with our strategy to hold if the market wants. Moving on to slide 16, we remain committed to maintaining a strong balance sheet and our investment-grade credit ratings. As Chris mentioned, our working has been rewarded with credit upgrades at S&P and Fitch in the first quarter. S&P upgraded Exelon's issuer credit rating to BBB plus from BBB. In addition, all subsidiaries were raised one notch. According to S&P, the rating upgrades reflect the successful execution of our business strategy, which has reduced business risk while maintaining strong financial metrics. Fitch also upgraded Exelon to BBB plus based on similar reasoning. Looking at ExGen, we are well ahead of our debt to EBITDA target of three times. For 2019, we expect to be at 2.4 times debt to EBITDA and 1.9 times debt to EBITDA on a recourse basis. With that, I will now turn the call back to Chris for his closing remarks.

Thanks, Joe. Turning to slide 17, we remain committed to our strategy and are pleased that our consistent execution is being recognized by the rating agencies and others. I'll close on Exelon's value proposition. We continue to grow our utilities targeting 7.8% rate base growth and between 6% to 8% earnings growth through 2022. We continue to use free cash from the GenCo to fund incremental equity needs at the utilities, pay down debt, and fund part of our growing dividend. We will continue to optimize the value of our ExGen business by seeking fair compensation for our zero-emitting generation fleet, selling assets where it makes sense to accelerate debt reduction plans, and maximizing value through the generation to load matching strategy of Constellation. We will sustain strong investment-grade credit metrics and grow our dividend annually at 5% through 2020. The strategy underpinning this value proposition is effective and providing tangible benefits to our stakeholders. We remain committed to optimizing the value of our business and earning your ongoing support for Exelon. Operator, we can now turn it over for questions.

Thanks, good morning.

Good morning, Greg.

Two questions. First, can you just give us a little more detail on the status of the bills that relate to energy policy in Illinois? What processes for moving them to vote? And I think you know you intimated that given the pressures on the legislature with regard to other Illinois issues that there might be a chance that this slips from the regular session for the veto session. So could you just talk through all those issues, please?

Sure. And as you pointed out, there is a lot of activity in the session right now, as the Governor prioritizes all of his issues. A lot of it's focused on the budget and revenue sources. Those bills are moving and being debated as we discussed. He also has a priority on achieving a zero-carbon generation fleet by the 2020-2030 timeframe. So there are numerous energy-related bills to get to that point. Our bill for the FRR, and there's one that's a path to 100, and then there's one that's the Clean Jobs Coalition. So we're in the process right now of negotiating with all the bills so we can come together and provide the legislature with a coalition that agrees on many things right now just working through the details. We hope to be done. Meetings are constant. I've met with the leadership of both the House and Senate, talking about what we need to do, and them showing their support for us going forward. And so we're just going to keep working on it as we always do. If it's not done in the regular session because of the other priorities, we will have it positioned to move through during the veto session; that's the generation bill. The other bill in Illinois that will affect Exelon is the extension of the ComEd formula rate for 10 years. That bill is proceeding. We've been able to work with stakeholders to gain support and recognition. As I mentioned, out of the nine past filings that we made with the formula rate, we've had four rate reductions. So it's very balanced for the consumer, it's very balanced for our investment strategy, and we are able to do so in a predictable way to serve our customers. So that's Illinois. Pennsylvania.

Thank you. Sorry, you might as well cover Pennsylvania too; I interrupted you. I apologize.

I believe that was coming, so I was going to do it. So, Pennsylvania, as you know, we've been working with the other nuclear operators there to create an alliance to continue and allow those assets to compete with the other non-emitting assets. The bill continues to garner support, and we'll continue to work through that. As we've told folks, we need clarity on this by the end of May or we're going to have to make the final steps and shut down. We won't be able to adequately procure, design, procure, and manufacture fuel for continued operations without that certainty and would not want to make that investment without that. So we'll continue working on it, and as you can see, the Governor has shown recognition that he wants to have a low-carbon future for the state and all recognize that cannot be done with the current technology without including the existing nuclear assets. So we'll work on that one and combine it with the Illinois effort.

Thanks. I have a quick question for Joe regarding slide 19. It appears that the free cash flow profile for the utility portfolio is lower than your previous projections, by about $300 million for the year. What is the reason for this, especially since your overall guidance for the long-term cash flow profile of the company seems unchanged?

Yes, Greg, you are correct. The variance compared to our Q4 disclosure is $300 million lower, driven by increased working capital to utilities, which we are funding with commercial paper. It’s important to highlight that from a GenCo perspective, our cash flow profile is still in line with the forecast we provided during the fourth-quarter call, which I believe is a significant point.

Okay. Is that working capital increase a permanent structural issue? Or is that related to things like storms or other things that might flip in future years?

Yeah, it’s the latter. It's more than just the ongoing business itself. And we had some favorable weather points in the quarter, and we took advantage of that from a work basis perspective.

Okay. Thank you.

Hey, good morning, everyone.

Good morning.

So just to follow up a little bit on Greg's question, can you elaborate a little bit on the scenarios around capacity auction participation, particularly if it happens in August? I'm thinking that given your commentary in the prepared remarks around the timing of Illinois legislation that it'd be difficult to implement any full FRR or anything else coming out of this Illinois legislation in time for the next upcoming capacity auctions. So I suppose there's a litany of scenarios. How do you think about them, particularly if FERC does indeed act around something else, say a partial FRR, for instance?

We have communicated to FERC that we find it very inefficient to conduct an auction in August, especially since we need guidance from FERC regarding the structure based on their previous ruling. Ideally, we believe this should occur in April, but PJM feels a need to proceed. We are hopeful for a response from FERC to clarify PJM’s request. The most probable situation for an FRR in Illinois points to the 2023 auction timeframe, based on our analysis. We need to pass the necessary legislation and collaborate with the Illinois Power Authority to develop the structure and operate it. While our estimate is ambitious, we are communicating with the IPA to determine its feasibility, which may take about eight months. We will continue to pursue this direction, but conducting an auction without clarification from FERC does not appear to be the best use of our resources at this moment.

Maybe even if it is delayed into 2020, and that is for the 2022 auction, how do you think about the choices before you?

Kathleen, you want to cover it more?

Sure. It's Kathleen. As Chris mentioned, we understand that once the FRR bill is enacted, it will take time to implement. The IPA will need to draft the rules, and the ICC must approve them, followed by the IPA conducting a procurement. If the auction isn't delayed, there won't be sufficient time for this process to be completed before the auction if it occurs in August. However, if it takes place next April, and the bill is enacted this spring, there will be enough time for implementation, assuming the auction is postponed to next April. Another uncertain factor is FERC's actions and the timeline for the coalition, alongside other clean energy initiatives coming together in Springfield. Therefore, it's difficult to make predictions since several variables are currently unknown.

All right. Fair enough. And then just to follow up on the business risk improvement in the credits out of the equation. Can you comment a little bit more about where you see that going over time, in terms of added latitude from an absolute perspective and just where you would like to see the credit rating over time? Just perhaps following on some of the recent improvements?

Yes, Julien, we are pleased with the upgrades from both S&P and Fitch, and we are continuing our efforts to stabilize the company's earnings and cash flows. We have been discussing how we are transitioning our earnings and cash generation to be driven by a more regulated outcome, and we are committed to focusing on that while managing effectively and collaborating closely with the rating agencies.

Okay, great. Thank you all very much.

Yes. Hi. Good morning.

Good morning.

So regarding Pennsylvania, something needs to be resolved by the end of May to save Three Mile Island. If it doesn't happen by then, could there be a possibility for the other plants to be addressed later on? How should we think about that?

We don't plan on stopping, and the coalition doesn't plan on stopping if the TMI deadline has passed. There are other critical assets in the state that need to be recognized for the governor's low-carbon future. And so we'll continue to work as hard as we are right now after the end of May for the other reactors in the state. So you've got eight other reactors that are very critical that are highly reliable, but their environmental benefits cannot be replaced with technologies available today without any significant cost. So we'll continue to work on it, and we believe that we'll end up successful at the end.

Okay. Thank you.

Hi. Good morning.

Good morning.

I wanted to just drill into the Illinois Clean Energy Progress Act a little further. I'm thinking through the procurement process, and I've read through the legislation, but I'm trying to understand the procurement process in terms of the clean bundled capacity. Is it possible to talk a little bit more about the generation that would be eligible? The mix of energy that would be procured? I'm thinking about zero carbon versus renewable, just to make sure I understand the nature of the clean bundled capacity that's going to be procured under this legislation, if it passes?

Kathleen, you want to go through that?

Yes, thank you, Stephen. We foresee that the State will be able to conduct a clean energy procurement, and any zero carbon resources will be eligible to compete for that capacity. The bill does not provide specific details on the timeline or other important elements, such as how prices will be managed by the IPA. The success of the Future Energy Jobs Act stemmed from bringing multiple parties together toward a unified goal, and the FRR concept is key to the various clean energy bills currently under consideration. Recognizing the authority of the IPA to oversee clean energy capacity procurement and to steer towards a zero-carbon future will grant it more flexibility than allowed under the current market rules, where every asset receives the same capacity payment regardless of whether it emits carbon. We've intentionally left space for discussion among stakeholders to ensure we have the right support, and as Chris mentioned at the beginning of the call, with the Clean Jobs Coalition including this in their bill and consumer advocates recognizing the significant benefits, we believe this is a promising partnership.

That's extremely helpful. Just as a follow-up there. In terms of the state's overall energy mix in terms of clean energy versus fossil, I know there is an objective to move towards clean energy over time. What would that energy mix broadly look like over time? How should we think about that evolution in the state?

So you're starting off right now with 60% of the generation statewide being zero-carbon emitting. Ninety percent of that statewide is nuclear. The concept that Kathleen talked about is we would, in the ComEd zone, currently we can account for 100% carbon-free, but we would have a transition period where you would have the carbon-free assets bidding at a greater percentage each year or being taken as a greater percentage each year as you build into 2030, when the procurement would become 100% carbon-free. And those details, the finite details there will have to be worked out, but that's the concept.

That's super helpful, and that's all I had. Thank you.

Sure.

Good morning, guys.

Hey.

Could I come back to the discussion about Illinois and timing? If I understand you correctly, implementing the FRR for the next auction, should it take place in April, would only be possible if it passes in the spring. Am I right about that?

Yes.

Okay. So, Chris, what exactly is your view on the spring session? You mentioned being optimistic in your prepared remarks about this year, but I wasn’t clear from your previous answer whether you think it’s more likely to happen during the veto session, or if there’s still a chance for the spring depending on how things develop?

We are working with the coalitions as hard as we can to have something presentable to the legislature supports to move in the spring. But what I've cautioned in our road shows and on the calls previously, there is a very aggressive legislative agenda in Illinois this spring. They are talking about a graduated tax legislation that is needed to pass for constitutional amendment under the 2020 election, the work on legalization of recreational marijuana, the work on the gambling and the sporting issues to continue to increase revenue. Those are the top three priorities. We come after that. We need to be ready to be able to tell our story, communicate, and have that coalition that we're building endorsing where we're heading. But we need to be realistic. We do think if it doesn't happen in the spring, we'll be ready to move it in a veto session in the fall.

Okay, great. So you're not saying it's impossible. You're just making us aware of the priorities and the pullback on the fall.

Right.

Okay. I wanted to ask about slide 10. You mentioned the NDT realized gains as one of the factors in ExGen compared to guidance, but it doesn't appear in the waterfall analysis. Could you quantify that part and explain the discrepancy?

Yes. The waterfall you're looking at year-over-year change, and the NDT gains in each of the years were roughly the same.

Okay.

So there would be no delta on the waterfall.

Got it. Roughly how much, Joe, if you are willing to share?

It's $0.02 a share.

Okay, great. Thank you.

Thank you all for participating in the call today. I think we're off to a very good start for the year. And so with that, we'll close the call out, and thanks again.